At the end of last year the Treasury published its Infrastructure and Construction pipeline update with a strong reiteration of the government’s pledge to increase offsite construction methods in public funded projects.

A call to action like this in a sector that is suffering from low productivity, increased material costs and a severe skills shortage suggests that offsite is an obvious solution that has found its time to make a real impact in the sector.

Prefabrication offsite is hardly a new concept – the Romans and Egyptians used it – but it is delivering innovative solutions and impressive productivity savings in a sector that desperately needs to “modernise or die”.

The ability of offsite construction to improve start to completion timeframes by around 50% brings significant cost benefits. Smaller workforce requirements mean less pressure on skills and working in a controlled environment offsite improves safety.

Offsite projects outperform their onsite counterparts with an ability to enhance overall productivity. Where almost 50% of onsite construction projects fail to reliably predict completion dates, offsite predictability is almost 100% reliable.

So, with such strong government backing and favourable market conditions why aren’t more projects being delivered using offsite construction?

A House of Lords Select Committee on Science and Technology report in 2018 cites the way the construction sector operates as the main inhibitor.  It recognises that greater collaboration is required between clients, designers and contractors from an early stage in a sector that is “fragmented and lacking in trust”.

The answer surely lies in a collaborative approach and a change in the current business and procurement models for large construction projects. The Select Committee recommended that government needs to work closer with the industry to bring about change and improvement but in an era of Brexit paralysis that is unlikely to happen quickly.

There is no doubt that we are about to witness a significant growth in offsite, but the jury is still out on exactly when the construction sector will get its act together for it to happen.

The UK construction is seeing growth and margins stagnating while at the same time almost every aspect of cost from materials to skills, is rising steadily.  It’s a situation that allows little or no room for error and demands that construction more project managers have to be more effective than ever.

Delivering a high quality project for a client on time and budget is no mean feat and while the skills of a project manager must be many and varied, there five aspects that are key to success.

Planning

Detailed strategic planning must start before the contract is finalised and needs to take account of every eventuality. Ask anyone in construction what the variables are and they’ll happily tell you, but how often were they properly considered in the planning? An effective project plan should be a road map to completion that defines the deliverables and risks at every stage of the process. It should identify and eliminate potential problems up front so that they don’t become costly fixes once site operations start.

Communication

Success requires teamwork and the best teamwork is always the result of effective communications. It’s vital to establish communication processes for everyone involved in the project. That flow of information needs to continue throughout the lifetime of the project. An effective PM should get out on to site as much as possible to measure progress and get as much feedback as possible.

Collaboration

Involve the supply chain with the design team from as early on as possible in the bidding process. One of the biggest benefits of collaboration is the potential to improve productivity and value on the project for everyone while delivering a quality building on time.  Involving everyone from the start, supported by effective communication, will also manage expectations and reduce client changes further down the line.

Review (and review again!)

Constant and repeated progress review is vital and minimises discrepancies with resources. Unforeseen problems are bound to occur but if they have been planned for at the start then it is easier to adapt, reassess and reprioritise. For example, a spell of bad weather might mean redeployment of staff onto other tasks.

Technology

There is no shortage of technology available to help project managers deal with the huge number of complex tasks associated with any construction project. That in itself can create problems if contractors in the supply chain all use different technology and software products that don’t integrate well.  It’s a significant consideration at the pre contract planning stage so that solutions can be found to allow effective sharing of documentation and data throughout the project.

The new year has started with a raft of doomsday predictions about the impact of climate change and the need for society to take seriously its responsibilities for future generations.

While some may be sceptical about the need for a vegetarian diet to save the planet, there can be no doubt that we need to up the pace of sustainable construction methods.

The UK goal is to achieve an 80% reduction in carbon emissions by 2050. But buildings account for 45% of carbon emissions and it’s estimated that 80% of the buildings we will occupy in 2050 have already been built.  The Intergovernmental Panel on Climate Change recently warned that we have 12 years to reduce the rate of global warming before widespread flooding and droughts become unavoidable.

The construction sector has a lot to do. While there have been some significant advances in sustainable construction, thanks to technological innovation and government support, greener building brings with it added expense. But there are signs that progress is being made and momentum will build in 2019.

In December the Royal Institute of Chartered Surveyors launched and Embodied Carbon Database to help built environment professionals identify where carbon reductions can be made throughout the construction process.

The Government’s recently published Energy Performance of Buildings Directive requires that minimum energy requirements in national buildings are set “with a view to achieving cost-optimal levels”. By this it means the best level of energy performance that can be achieved whilst remaining cost effective over the lifetime of the new building. While the report concludes that current building regulations are sufficient for new buildings in the UK to meet the requirements of the Directive, it has already committed to a review later which will likely tighten standards.

Many UK cities are now adopting a policy to be carbon neutral within 15 – 20 years and these targets will only be achieved with a net zero carbon neutral new build policy.

The challenge for the construction sector is to find the will to deliver sustainable solutions at a time when productivity and growth in the sector is flatlining resulting in significant pressure on profitability.

The commitment to a greener built environment has to transcend the entire supply chain, starting with the client. While the sector needs to continue to innovate and create solutions it also needs to educate clients on the benefits and measurable social value of green buildings

Just a few weeks ago the Construction Products Association downgraded its predicted growth forecast of 2.3% for 2019 to an almost flatlining 0.6%. They also warn that the revised figure depends on the Government extending Help to Buy and progressing its infrastructure plans.

There are many ways to improve the construction sector, but addressing these 3 key priorities effectively would help to boost growth this year:

Fix Brexit one way or another

There is no doubt that the uncertainty around Brexit runs throughout every business sector but the effect on UK construction is significant. It has eroded investor confidence resulting in many projects being put on hold or cancelled.  The new office construction sector has felt the sharpest decline of 10% this year, expected to double to 20% in 2019. The market needs a solution to the Brexit conundrum one way or another to bring back some confidence and encourage new projects.

Until the Government delivers that certainty it is impossible for businesses to plan effectively. The potential impact on labour shortages, loss of EU funding for major projects and movement of construction materials is huge. Businesses can plan and adapt to change but only if they know what the change will be.

Improve productivity

If ever there was a time to focus on improving productivity in the sector it must surely be now when predicted growth is almost zero and margins are small. The obvious way to improve growth in the UK construction sector is to become more efficient, making cost overruns and delays the exception.

We need to release the expertise of the specialists in the supply chain through better collaboration and early contractual involvement. This would create the platform to adapt to better ways of working across the entire supply chain.

A skilled workforce

While there has been much talk of Brexit’s impact on skills, the reality is that there has been a steadily increasing demand for skills since 2007. Earlier this year the Government announced a £22 million initiative to bring training to construction sites. All well and good but the key to success is education.  More needs to be done in schools and colleges to educate and inform pupils and their parents about what a career in construction can look like. Yes, the skills shortage is a national crisis that is restricting growth in the sector, but it’s also an opportunity to influence the future of the sector and create a new generation of skilled workforce that know how to deliver a project on time and budget.

Anyone who has any doubts about the urgency to improve productivity in public sector infrastructure construction projects need look no further than the Crossrail project for proof that change is needed – and quickly.

The news that Crossrail faces a £2bn cost overrun on its original £14.8bn budget and the planned opening date of Autumn 2019, postponed from December 2018, is now no longer viable gives a depressing example of another major public project overrun to add to a long list that includes the Olympic Stadium, HS2, The Shard and Edinburgh Trams, to name just a few.

It highlights more than ever the need for the Government’s Transforming Innovation (TIP) and Performance initiative to make a meaningful impact in improving productivity in the sector.  TIP aims ultimately to lift productivity growth by the adoption of digital and manufacturing technologies and transitioning to new collaborative business models with better integrated supply chain models.

The new £600bn ten year infrastructure investment pipeline is anticipated to optimise the construction process from start to finish and the initiative aims to eventually deliver £15bn a year in productivity savings.

The programme is working to develop benchmarking and standards for projects as well as accelerating the use of modern methods of construction like offsite manufacturing and incorporating more use of digital technology and collaboration throughout the supply chain.

However, we need to recognise that it isn’t just the client’s responsibility to keep costs down and increase productivity. The key to achieving the aspirations of TIP is in releasing the expertise of the specialists in the supply chain through better collaboration and early contractual involvement. This would create the platform to adapt to better ways of working across the entire supply chain.

It’s clear that the UK economy and the construction sector is missing out on a significant amount of growth that could come from improved productivity. But it’s up to everyone in the supply chain to work together to overcome the barriers to change and deliver that improvement.

There has been much debate about the impact of Brexit on a construction industry that was already facing a severe skills shortage even before the referendum in 2016. But latest information – or lack of information – in the proposed Brexit immigration reforms suggests that there are no stated plans to allow EU nationals to take up self-employment in the UK.

This has devastating potential for UK construction, where a large proportion of the workforce is self-employed, many of whom are EU migrants providing vital skills and labour to the industry.

While plans for points based systems and special visa arrangements for skilled EU migrants are proposed by the Government, there is no indication of special arrangements being available for EU migrants who want to set up in the UK construction sector as self-employed.

The recent Migration Advisory Committee (MAC) report on European Economic Area migration fails to consider any reforms for self-employment.

It is estimated that around 41% of UK construction workers are self-employed. Unless special arrangements are put in place, post Brexit any EU national who wants to set themselves up as self-employed in the UK construction sector will have to invest £200,000 in their business, which is a huge barrier to most.

At a time when plans for infrastructure and housing require a strong pool of construction resources the Government needs to ensure that Brexit plans include special arrangements for self-employed migrants working in the sector. If not, then the result will surely be rising costs and delays on major projects which will impact communities across the country.

For the UK construction and civil engineering sectors the latest budget appears to have  provided some much needed investment in infrastructure and roads which looks like good news.

An additional £420 million to local authorities to tackle potholes and repair roads along with £240 million targeted investment in transport, £37 million of it for Northern Powerhouse Rail and £16.5 million for Tees Valley, will be welcomed by many.

Additional support for apprenticeships, cutting the contribution rate by half to 5% for SMEs is a positive response to significant lobbying from business.

The official abandonment of PFI is an opportunity for the Government and public sector as a whole to reset its infrastructure procurement mechanisms and move towards genuine long-term best value rather than the historical race to the bottom culture of ‘lowest price wins’.

But can we really trust anything the Chancellor said? While taking an upbeat tone in his budget speech to Parliament the Chancellor had no choice but to mention the elephant in the room that is Brexit.   He said that a no deal Brexit would require a “different response”.

With that major caveat are businesses in any position to make plans based on the budget announcement? If the UK leaves without a deal then a new budget will be required next Spring, which pretty much makes everything the Chancellor has announced entirely moot until the Brexit process resolves itself.

Businesses should really treat the latest budget as a list of good intentions but hold off from making any major changes in their planning until an agreement (or not) on Brexit.

Sadly, it’s a situation that most must be used to after two years of continued uncertainty.

Post Carillion, the temptation is to say we’ve learned the lessons and will move forward.  But how likely is it that nothing will change and large Tier 1 contracts will continue to be awarded and managed as they always have been until another company fails and the whole process starts again?

The markets have been betting against the construction sector with reports of significant recent increases in short positions in some of the country’s biggest construction and outsourcing contractors.

It’s clear that continuing with the same models of business only brings higher risk than ever and the balance of reward is becoming even smaller.  So if clients and contractors keep doing the same thing then the same outcome – another company failure – is inevitable.

The traditional contracting model sees all the risks passed to the sub-contract supply chain with Principle Contractors accepting the overall contract risks for a very low margin. A recent survey found that the average pre-tax profit margins for the 10 largest Principle Contractors was -0.5%. The numbers speak for themselves.

The industry needs to change its long held loyalty to a delivery model for large projects that simply isn’t working. While the ultimate solution is self-performance without the reliance on a large chain of sub-contractors, it requires a strong pipeline of projects to sustain high staffing and training costs but brings with it direct control of costs and quality. This may be achievable for midsize engineering and construction companies but unlikely for the larger Principle Contractors who are delivering large projects such as HS2.

A collaborative and transparent process between client, contractor and the client advisory team is likely to deliver genuine best value for the client along with reasonable and fair margins.  A proportionate approach to contracting risk also needs to be considered, are bonds and retention required on any project? Should a contractor take process risk? We also need to consider the role of advisory teams and how to incentivize the creation of a repeatable team and process which will inevitably create improvements.

The greatest thing the construction industry has to fear is its own inability to adapt – If it doesn’t change then the cycle of large contractor failure will only continue.